Australia's St Barbara snaps up Canada's Atlantic Gold for $536 mln

MELBOURNE (Reuters) - Australian gold miner St Barbara said on Wednesday it will buy smaller Canadian peer Atlantic Gold Corp for C$722 million ($536 million), marking a second overseas acquisition for cashed-up Australian producers.

St Barbara’s C$2.90 a share cash offer represents a 39% premium to Atlanta Gold’s closing price on Tuesday in a deal that analysts said opened up growth options, but could lead to a call on capital and crimp dividends.

“Buying an unknown asset in a new country which itself potentially requires a fresh injection of capital... could present an additional barrier for some investors,” said RBC Capital in a report.

The bid, which has the backing of Atlantic’s board, comes after Australian gold miner Newcrest Mining Ltd bought a copper and gold mine in Canada for $806.5 million in March and said it had the firepower for more acquisitions.

Other mid-tier Australian miners, Evolution Mining and Northern Star Resources have also been touted by analysts as acquirers of miners overseas.

Australian dollar denominated gold is just shy of January’s record of A$1,894 an ounce and up about 9% from a year ago, while U.S. dollar gold is virtually flat.

“The high AUD gold price has benefited Aussie gold miners but they have also done very well operationally,” said UBS analyst Dan Morgan in Sydney.

“In aggregate they have focused on cashflow which investors have liked,” he said.

Atlantic Gold, whose flagship project is the Moose River mine in Nova Scotia, said the offer delivered an attractive premium to shareholders. Directors and officers of Atlantic who control 32 percent of shares had agreed to back the bid.

St Barbara said it would raise about A$490 million ($340 million) to partly fund the bid, with the remainder coming from its own cash reserves.

“The addition of Moose River to the portfolio diversifies St Barbara’s production base with a low cost producing asset in a very favorable and prospective jurisdiction,” St Barbara Chief Executive Bob Vassie said.

Atlantic Gold Chairman and CEO Steven Dean would be invited to join St Barbara’s board and the company’s operating team would be retained. St Barbara expected to close the deal in July.

The latest buy comes amid a shakeup in the gold sector. Barrick Gold and Newmont Mining have said they will focus on the best-performing mines following their respective acquisitions of Randgold Resources and Goldcorp. This has prompted expectations of mine sales around the world over the next few years.

($1 = 1.3459 Canadian dollars)

($1 = 1.4413 Australian dollars)

Reporting by Melanie Burton; additional reporting by Rushil Dutta and Philip George in Bengaluru; Editing by Stephen Coates and Richard Pullin